Friday, January 9, 2009

Ruralindustrialisationandspatialinequalityin china

Ruralindustrialisationandspatialinequalityin china, 1978-2006
Chris BramallThis study analyses the impact of rural industrialisationinChinaonpovertyandspatialinequalityatthecountylevel between 1982 and 2000. The most positiveconsequenceofindustrialisationhasbeenitscontributionto absolute poverty reduction, especially in the coastalprovinces. Much less clear is whether migration – mainlyfrom west to east and driven by rural industrialisation– has contributed to poverty reduction in the interior.For,remittanceshaveaccruedmainlytotherelativelywelloffratherthantotheruralpoor.Morenegatively,counties which were large exporters of labour havesuffered a skill drain. However, the main adverse effectof rural industrialisation has been its exacerbation ofspatial inequality, which has also resulted in a rise ofinequalitiesinpercapitagdpamongChina’scounties.Chris Bramall (c.m.bramall@sheffield.ac.uk) teaches Chinese Political Economy at the School of East Asian Studies, Sheffield University,Sheffield, UK. It is well known that rural industry has expanded rapidly inChina over the last three decades, and that the pace of this expansion has made the People’s Republic unique.1This arti-cle analyses the impact of this industrialisation on poverty and spatial inequality at the county level. To do so, I have used migra-tion data collected during the 2000 Population Census, and anew set of per capita gross domestic product (GDP) data for everyChinese county for 1982 and 2000 to estimate per capita growthrates. The paper begins by outlining the process of rural industri-alisation (Section 1). Section 2 discusses the impact of industriali-sation in the countryside on absolute poverty. Section 3 shifts thefocus to trends in spatial (county-level) inequality between thepopulation census years of 1982 and 2000.1 TheexpansionofRuralindustryWhen Deng Xiaoping seized power in 1978 and brought theMaoist era to its de facto conclusion, there were some 7,90,000industrial enterprises run by communes and brigades (CBEs) across the whole of China, employing about 17 million workers.2However,the growth of the Maoist era was a mere prologue; between1978 and 2006, employment increased by around 6% per annumin the township and village enterprise (TVE) sector. By 2006,TVEs employed no fewer than 149 million workers, of whom 85million were working in industry (SSB 2005: 495; SSB 2007b:Table 7.2). The pace of expansion was so rapid that it even surprised the Chinese Communist Party leadership (Deng 1994: 236).3Impressive though these figures are, they understate the trueextent of industrialisation in the Chinese countryside. This is be-cause the TVE definition of rural industry, though widely used inthe literature, is much too narrow; it excludes enterprises operat-ing in rural areas but owned by Chinese county governments andhigher administrative jurisdictions, such as ministries. The logicto the identification of “rural” with “TVE” is that such state-owned enterprises (SOEs) and collectively-owned enterprises (COEs) werepart of the plan, whereas TVEs were not. From a geographical point of view, however, it makes little sense to include one type of enterprise based in a county town (zhen) in the rural category butanother type of enterprise operating in the same county town inthe urban category. It is more logical to classify all enterprises based in Chinese counties as rural. Though consistent time seriesdata on rural COEs and SOEs are not available, these types of ru-ral enterprises were far from insignificant. For example, county-owned SOEs employed 29 million workers in 2006 and there wereperhaps four or five million in county COEs (SSB 2007b: Table 4.1).Some of these “enterprises” were schools or hospitals, but it is
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china since 1978december 27, 2008EPWEconomic & Political Weekly44hard to believe that total employment in rural industry (TVEs, SOEs and COEs combined) can have been much less than 100million in 2006. Official rural employment stood at around 500million in that year, suggesting an industrial share of about 20%of the rural workforce.4Much of the growth in the early 1980s was driven by small-scale private enterprises, partly because the more inefficient CBEs were closed during the “Readjustment” of the early 1980s. Never-theless, the public sector – rural enterprises owned and oftenmanaged by township and village governments – expanded rap-idly after the mid-1980s and dominated the TVE sector until themid-1990s; the public sector share was 50% of total TVE employ-ment and 65% of value added in 1994 (Bramall 2007: 78-79).Thereafter, privatisation was swift. By 2005, the public share was only 25% of value added and 18% of employment (Nongye bu2006: 226).5Even in Jiangsu province, the heartland of publicrural industry in the 1980s and 1990s, privatisation was rapidand thoroughgoing. By 2005, the share of the public sector (usu-ally called “collective industry” in Chinese sources) in Jiangsuwas down to a meagre 8% of value added (JSB 2006: 202).2 indigenousRuralindustrialisationandPovertyThe most positive consequence of industrialisation has been its contribution to absolute poverty reduction. Official Chinese datashow a fall in the absolute poverty headcount from 250 million in1978 to 14.8 million in 2007 (CPIRC 2008). These magnitudes arenot reliable; it is hard to square an absolute poverty figure of 250million with the high levels of life expectancy recorded in the late1970s. However, there is little doubt that absolute poverty has fallen sharply over the last three decades.There is equally little doubt that poverty reduction has beenrapid in those places where industry has developed most quicklybecause the new local enterprises have enabled workers to aban-don (low wage) jobs in farming, thus “leaving the land but notthe countryside” (litu bu lixiang). Rural industrialisation has been most rapid in eastern China, which entered the 1980s withboth a well-developed industrial base (one of the key legacies ofMaoism) and favourable economic geography (especially in termsof low transport costs). And many parts of the region have lockedin those advantages by attracting large inflows of foreign capital.The most obvious examples are the deltas of the Yangzi (Sunan)6and Pearl rivers, but rapid industrialisation has been the normacross the coastal region. As a result, 29% of the rural workforcein the eastern region was employed in industry by the end of 2006, compared with only 5% in western China (SSB 2008). Nowonder, then, that absolute rural poverty has been virtuallyeliminated in eastern China: only 0.7% of the eastern populationwas officially categorised as poor in 2006 compared with 5.1% inwestern China (SSB 2007a: 8).The significance of industrialisation is apparent from thesources of rural income (Table 1). The gap in per capita incomebetween China’s richest provinces like Jiangsu and Guangdong,and poor provinces such as Gansu and Yunnan was very markedby 2006. Yet differences in income from household production(mainly farming) were small as a comparison between Yunnan and Guangdong demonstrates. The main reason for rural prosperityin the richer provinces was the high wage income from industrial employment. For example, wage income per head in Jiangsu was over seven times larger than in Yunnan. Moreover, wages were thefastest-growing com-ponent of rural income(Gustaffsonetal 2008: 64-65). In otherwords, industrial em-ployment offered aroute out of povertyinthe1980sand1990s.It is the scarcity of such jobs that ex-plains its persistencein western China.The role played by industrial growth in poverty reduction is also apparent from county-level data on GDP. Much of rural Chinawas very poor in the late 1970s, mainly because of dependence onlow productivity agriculture, but rapid industrialisation has transformed the fortunes of the people. Henan province, for ex-ample, has comfortably eclipsed its neighbours in terms of percapita GDP growth (Figure 2, p 47). This is especially interestingfor two reasons. First, the auguries for rural development wereunpropitious because Henan was one of the poorest parts of China in the late 1970s. Twenty-six of the 221 poor counties identified in 1977-79 were located in Henan alone, a total second only to that recorded in Guizhou (Nongye bu 1981: 120). Second,rural industrialisation has driven growth; rapid GDP growth has occurred in both urban and rural areas, and it has been based onindustrial development.Rural industrialisation has not yet transformed Henan’s pros-pects. For one thing, poverty has not been eradicated. Accordingto a list of poor counties used by the State Council’s Office of theLeading Group for Poverty Reduction (OLG) in 2004, 31 of the 592counties were to be found in Henan (OLG 2004). The main prob-lem, as Table 1 shows, was that wages were still contributingmuch less in Henan than in Jiangsu or Guangdong, TVE expan-sion notwithstanding. For another thing, industrial growth hasbrought environmental damage in its wake, with unknown con-sequences for long-term poverty reduction. The main problem iswater pollution in the Huaihe river basin, mainly caused byHenan’s paper and pulp industry. As Nygard and Guo (2001: 17)conclude: “Henan [was] the largest water and COD load generator... [this] explains why Henan Province was singled out as one of the main targets for the closing down interventions applied from1996.” Some 17,000 industrial TVEs were closed between 1996 and 1997 in Henan (out of a national total of over 64,000 closures),which reduced chemical oxygen demand in the province’s rivers by about 70% (Nygard and Guo 2001: 32, 39). For all that, theproblem of pollution persists: the Haihe was still the most pol-luted of China’s river basins in 2005 (SEPA 2006: 19). The impactof rural industrialisation on short-term poverty reduction hasbeen positive across Henan but the province has stored up a rangeof future problems for itself.The positive impact of rural industrialisation on poverty is per-haps more apparent in China’s coastal provinces. The breakneckTable 1: sources of Rural income (2006)(yuanpercapita)ProvinceTotalNetWageIncomeNetIncome IncomefromHousehold ProductionJiangsu5,8133,1052,271Guangdong5,0802,9061,694Henan3,2611,0232,108Guizhou1,9857161,113Yunnan2,2514421,632Gansu2,1346371,292China3,5871,3751,931The surveys on which these data are based are not ful y reliablebecause they under-sample both rural rich and rural poor.Source: SSB (2007a: 320).
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china since 1978Economic & Political WeeklyEPWdecember 27, 200845pace of industrialisation in Zhejiang’s Wenzhou municipality is well known. Private industry, producing goods ranging from lowvoltage electrical appliances, shoes, socks, badges, cigarettelighters and buttons, developed more quickly than anywhere elsein China, so much so that the municipality was held up as a modelof industrialisation (Nolan and Dong 1990; Sonobe et al 2004).Less well appreciated is that much of Zhejiang municipality was very poor in the late 1970s. Three from the list of 221 poor counties drawn up by the Ministry of Agriculture (MOA) for 1977-79 werein Zhejiang and two of these (Wencheng and Taishun) were inWenzhou (Nongye bu 1981). Moreover, these two counties werestill on the MOA’s list of 220 poor counties for 1994, meaning aver-age per capita income was below 500 yuan per annum (Nongyebu 1995: 331, 354). By 1998, however, the problem of absolutepoverty in Wenzhou had been largely solved; not a single one of Zhejiang’s counties featured in the MOA’s list of 247 counties withan income level of below 1,000 yuan. The OLG, which utilises adifferent poverty methodology, also included Wencheng and Taishun in its first list of 258 nationally designated poor counties,drawn up in 1986 (OLG 1989). By 1993, however, when it pro-duced a revised list of 592 counties, none from Zhejiang were onit (OLG 2004). Rapid growth was the key ingredient in the process of poverty reduction; in real terms, per capita GDP rose by 10%per annum in Wencheng between 1978 and 2004, and by 13% inTaishun (Wenzhou tongjiju 2005: 42-43, 76-77; SSB 1988: 594).Given that environmental degradation has been less extensivethan in Henan, Wenzhou’s achievement is clear.2.1 Ruralindustrialisation,Migrationand PovertyReductionMuch less clear is whether migration – mainly from west to eastand driven by rural industrialisation – has contributed to povertyreduction in the interior.7Not that its scale is in doubt. The 2000Population Census, the most reliable data source we have, shows that there were some 144 million migrants, and that 42 million ofthem had crossed provincial boundaries (SSB 2002: 102-103).8The main exporters of labour were Sichuan, Anhui, Hunan andHenan. Even in places like Wenzhou where indigenous industri-alisation had driven poverty reduction, migration was considera-ble. The total population of Wenzhou municipality rose by 27%betweentheCensuses of 1990 and 2000 (SSB1988: 594; SSB 2000).However, the popula-tionofTaishuncountynet of migration fell by5%, and neighbour-ing Wencheng’s popu-lation fell by 19% as migrants from thesetwo poor counties sought jobs elsewherein the municipality.Migration was de-termined by a combi-nation of motive and opportunity. The main motivation was poverty: of the 10 prov-inces in Table 2, eight had a per capita GDP below the nationalaverage and Heilongjiang’s inclusion reflects the harsh climate, astrong inducement to migration. But opportunity mattered too.Gansu, one of the poorest provinces in China, does not make this list because it is far removed from the eastern centres of industri-alisation. By contrast, the opportunities for those living in Anhui(located close to the growth pole provided by rural industrialisa-tion in Sunan, and of course Shanghai) were much greater.The principal importers of migrants have been Guangdong,Zhejiang, Jiangsu and the cities of Shanghai and Beijing (SSB2006: 290). Urban destinations were very popular; 2.5 millionand 3.1 million were living in Shanghai and Beijing respectivelyby 2000. However, many migrants have found employment inenterprises located in areas which were rural in the early 1980s,like southern Jiangsu, the Wenzhou countryside and across Guangdong’s Pearl river delta. Of the 10 county-level jurisdictions which received the largest percentage of migrants by 2000, onlyLongwan, a district of Wenzhou city, was officially classified as urban in 1982 (SSB 2000). Even Dongguan, which attracted thelargest single number of inter-provincial migrants by 2000 (4.14million), was an example of rural industrialisation; it was only acounty in 1982. The same is true of the districts of Shenzhenlike Bao’an, which was home to 1.84 million migrants in 2000(67% of its total population). In other words, rural industrialisationTable 2: Outmigration by Province of Origin (2000; top10suppliersofinter-provincialmigrants)ProvincePerCapitaGDP TotalMigrants MigrantSharein 2000 (Yuan)(Mil ion)in Total Provincial Population(%)Jiangxi4,8513.689.1Sichuan4,7846.948.4Anhui4,8674.337.3Hunan5,6394.316.8Guangxi4,3192.445.6Hubei7,1882.814.7Guizhou2,6621.604.5Henan5,4443.073.4Chongqing5,1571.063.3Heilongjiang8,5621.173.2China7,07842.423.4Data are for the stock of the floating population in 2000.Source: ACMR (2006); SSB (2001: 59).0-50005001-2500025001-5000050001-206227Figure 1: The Destination of anhui’s inter-Provincial Migrants (2000;stockof extra-provincialoutmigrantsbycountyandcity)There were 1,054 Anhui migrants living in an average Chinese county in 2000. The data excludesmigration within Anhui.Source: ACMR (2006). Migrant NumbersBeijingTianjinShandongJiangsuAnhuiShanghaiZhejiangFujianGuangdong
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china since 1978december 27, 2008EPWEconomic & Political Weekly46transformed counties into cities during the 1980s and 1990s byattracting migrants.The case of Anhui exemplifies the underlying dynamics of themigration process. Although agricultural growth in the early1980s had made a dent in rural poverty, the province was still verypoor in 2000. Per capita GDP was only two-thirds of the national average and Anhui was alone among the eastern provinces inthat its illiteracy rate (13.5%) exceeded the national figure of 8.7% (SSB 2001). Not surprisingly, therefore, many of Anhui’srural population were keen to migrate during the late 1980s and the 1990s and – equally unsurprisingly – the main destinationswere Shanghai and the neighbouring provinces of Zhejiang and Jiangsu (Figure 1, p 45). Some found their way to Beijing and toGuangdong, but most sought the industrial jobs on offer in the rural industries springing up across the Greater Yangzi delta region.Such migration out of Anhui and elsewhere undoubtedly con-tributed to poverty reduction directly (migrants increased theirincome by moving to industrial jobs), and indirectly via the pay-ment of remittances by migrants to their natal village. Remit-tances totalled between 15 and 30% of net rural income in prov-inces like Jiangxi by 2006, and virtually all of China’s poor prov-inces (Yunnan was the only exception) were significant recipients (SSB 2007a: 320, 322). Moreover, the 2002 data show households living in nationally designated poor counties receiving a per cap-ita remittance income of 240 yuan. Although less than the na-tional average in absolute terms (which was 298 yuan), this in-come amounted to 18% of net income in poor counties, compared to only 12% in an average county (SSB 2003: 81).Nevertheless, migration was at best an incomplete solution tothe poverty problem. For one thing, many of those living in nation-ally designated poor counties were not poor at all (Riskin 1993).And it was these non-poor households which benefited more fromremittances than those living below the poverty line. This emerges from a 2002 survey of those living in designated poorcounties (Table 3). Of the 52,624 households covered in this sur-vey, 273 had a per capita income of less than 100 yuan. Althoughthis income level was pitifully low – the official poverty line in2002 was 627 yuan (SSB 2007a: 43) – these very poor households benefited more from remittance income in percentage terms thanany other class. However, the most striking feature of Table 3 isthat the remittance income of other households living below thepoverty line was lower than (both abso-lutely and proportionately) the remit-tances received by non-poor households.9Tellingly, the income class just below thepoverty line (earning between 300 and 500 yuan) earned the least in percentageterms from remittances. Only when percapita income reached 2,500 yuan did re-mittance income become less important inrelative terms. The conclusion is clear. Re-mittances generated by outmigrationhelped all the income groups in poor coun-ties but it was a remarkably inefficient wayof reducing absolute poverty because thebulk of remittances went to the non-poor.Poor households gained little from outmigration because most migrants were younger and better educated than the rural norm whereas many poor households were in poverty precisely be-cause they lacked educated young workers who could find out-side work. For example, the 2002 survey of poor counties revealed that only 8% of workers from illiterate householdsmigrated, whereas the figure was 16% for those with a middleschool education (SSB 2003: 155). The comprehensive Second Agricultural Census of 2006 also shows that migrants were not representative of the rural population: 53% of migrants were aged 30 or younger, compared with 30% of the ruralpopulation as a whole. Only 36% of migrants were womencompared with 49% of the rural labour force. And, whereas 6.8% of the rural labour force was illiterate, that was true of only 1.2% of migrants (SSB 2008). This was truer of a province like Guangdong. The proportion of illiterates in the floating population was slightly higher (1.3%) but no less than 71% of the floaters were aged under 30 in 2000 (GSB 2003: 78-79). In short,the typical migrant was male, young and relatively well educated and therefore little remittance income went to the neediestrural households.Moreover, because migrants were more skilled than the aver-age rural worker, the countryside suffered a skills drain whichconstrained indigenous industrialisation. To be sure, this drainwas partly offset by return migration. However, recent researchsuggests that the contribution of returnees was small. Accordingto Wang and Fan (2006: 951): “Contrary to most studies on Chinathat emphasise success returnees such as entrepreneurs, this study shows that these returnees are rare but that failure return-ees – those who are rejected by the destination and who havedifficulties surviving there – are prevalent.” There is not evenmuch evidence that return migration increased rural investment;the accumulated capital of returnees was typically spent onhouse-building and durable consumer goods in non-poor vil-lages, and on food, clothing and other necessities in poor villages (De Brauw and Rozelle 2008).In short, it is difficult to be sure about the net effect of migra-tion on absolute rural poverty. Most of the literature is positive(Fan 2008: 79) and there can be no denying the positive effects of migration. However, remittances accrued mainly to the relativelywell off rather than to the rural poor. More negatively still, coun-ties which were large exporters of laboursuffered a skill drain. The extent to whichthis constrained industrialisation, andthereby offset the remittance effects, re-mains largely unexplored terrain. There is no evidence of declining per capita realincomes even in poor areas, but this mayjust be because the positive effects of (limited) indigenous development and continuing educational expansion are off-setting the adverse impact of outmigration.As Hare and Zhao (2000: 150) say: “Migra-tion should not be seen as a substitute forlocally based efforts to improve economicconditions in the rural areas”.Table3:incomeReceivedfromMigrantRemittancesin Poor counties (2002)IncomeClassHouseholds RemittanceTotalNetRemittance(Yuan Per Head)(Number)Income Per Income PerShare (%)Head (Yuan) Head (Yuan)0-100273215935.6100-3001,273212219.5300-5003,068334118.0500-8009,0036965010.6800-1,0007,13712389613.71,000-1,50014,3802161,23017.61,500-2,0008,3093511,72120.42,000-2,5004,3125022,22022.62,500-3,0002,1646152,72422.6> 3,0002,7058484,12520.6All classes52,6242401,30518Sources: SSB (2003: 81, 158-59).
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china since 1978Economic & Political WeeklyEPWdecember 27, 2008473 RuralindustrialisationandspatialinequalityThe main adverse effect of rural industrialisation has been its ex-acerbation of spatial inequality.10The fiscal decentralisation of the early 1980s favoured counties with a large revenue base; nolonger required to hand over the lion’s share of their tax revenueto higher level administrative organs, prosperous counties could use it to invest in industrial expansion. Conversely, poor counties were even less able to invest in industry than they had been be-fore 1978, when they did at least receive significant fiscal trans-fers. The net result was spiralling spatial inequality.3.1 ThespatialPatternofRuralindustrialisationAs Kaldor demonstrated, GDP and industrial growth often gohand-in-hand in developing and middle income countries be-cause manufacturing is the pre-eminent engine of growth. Thesame has been true for China, except perhaps during the agricul-tural boom of the early 1980s.11The spatial pattern of county-level industrialisation can therefore be seen from trends in GDPgrowth between 1982 and 2000 (Figure 2).The growth rate of the median county-level jurisdiction (in-cluding cities) was 16%. The provincial, county and city bounda-ries here are those of 1990, which serves as a convenient mid-point. Reliable county-level deflators do not exist; hence the use of nominal GDP data. The years 1982 and 2000 serve as convenientanalytical endpoints because we have GDP data for 2000 and data can be estimated for 1982 (there are no official all-China county-level data for the late 1970s or early 1980s) using data on gross output value and employment, for which there are no comprehensive official data. County-specific shocks in either of the endpoint years and the absence of county-level price deflatorsmake the methodology a little rough but the results are in linewith what we know of spatial trends during the two decades.(SeeBramall 2007 for sources and methodology.)Several features stand out from Figure 2. The success of ruralindustrialisation (as proxied by GDP) is clear in both Henanprovince and Wenzhou (the dark area in southern Zhejiang), aspreviously noted. GDP growth was especially fast in countieswhere FDI inflows were large – the Shandong peninsula, southernLiaoning, Jinjiang in Fujian and the Pearl river delta, and so tooin peri-urban counties located close to the great metropolitancentres of Shanghai, Beijing and Tianjin. Resource-rich areas such as the gas-producing region spanning northern Shaanxi andsouthern Nei Menggu also prospered. By contrast, most countiesin central and western China experienced slow GDP growth.There were of course exceptions, but in general these were small clusters of counties located close to provincial capitals (as in thecase of the Chengdu plain in Sichuan).Figure 2 also demonstrates the limited spread effects gener-ated by rural industrialisation. Rapid industrialisation in Sunandid not spillover into rapid growth in northern Jiangsu; the his-torical divide between these two regions has persisted over thelast two decades. Similarly, the growth of the Shandong penin-sula did not translate into rapid growth in underdeveloped west-ern Shandong. Note also the very limited spillovers from indus-trialisation in south-east China. Northern Guangdong benefited little from the industrialisation of the Pearl river delta as alsoJiangxi province from its proximity to the three fast-growingprovinces of Zhejiang, Fujian and Guangdong. No other interiorChinese province enjoys such a favourable position, yet Jiangxihas done worse than the average.3.2 TrendsinspatialinequalityFigure 2 illustrates spatial differences in GDP growth, but it does not tell us whether inequalities in per capita GDP have widened ornarrowed over time. Natural rates of population growth werequite similar across counties but not so rates of migration, whichtended to raise per capita GDP in labour-exporting counties and lower per capita GDP in labour-importing counties. We thereforeneed to combine nominal GDP data with population data (the2000 Census included a count of migrants) to identify the evolu-tion of spatial inequality.This is the approach adopted in Table 4 (p 48) for county-level per capita GDP between 1982 and 2000.12It shows that overallspatial inequality increased substantially; between 1982 and 2000,the coefficient of variation (CV) rose from 0.74 to 0.84. To under-stand the processes at work, however, we need to recognise thatthe trend in spatial inequality depended upon three factors: in-ter-county inequality (in other words, differences in rural growthrates), intercity inequality and changes in the urban-rural gap.Of these three, the contribution of inequality between cities torising spatial inequality was slight. Decomposition analysis usingthe Theil coefficient shows that the contribution of inter-urban tooverall inequality actually declined from 26% in 1982 to 20% in2000. Moreover, the contribution of the urban-rural gap toNingxia0-1617-2021-40GDP Growth 1982-2000Figure2:GrowthofnominalGDPbycounty(1982-2000; % per annum)QinghaiLiaoningNei MengguBeijingTianjinHeberShanxiShandongShaanxiHenahJiangsuHubeiShanghaiZhejangAnhuiHunanJiangxiFujianGuangdongSichuanGuizhouYunhanGuangxiHainanGansu
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china since 1978december 27, 2008EPWEconomic & Political Weekly48overall inequality also fell (from a massive 60% in 1982 to only38% in 2000).13By contrast, the contribution of inequality be-tween counties (inter-rural) to overall inequality rose from 14%in 1982 to 42% by 2000.The impact of rural industrialisation on overall spatial inequalitywas twofold. On the one hand, it played a role in the narrowing of theurban-ruralgapshowninTable4.Establishedurbancentres likeShanghai grew from a relatively high base after 1978, whereas suc-cessful industrialising counties – such as Kunshan in Jiangsu orDongguan in Guangdong – have enjoyed the advantages of back-wardness. The impact is apparent from theexample of Wenzhou. Wenzhou city properexperienced GDP per capita growth of only12% a year between 1978 and 2004, whereas the median growth rate for the counties within Wenzhou municipality was 15%(Wenzhou tongjiju 2005: 42-43, 80-81). As aresult of this narrowing of the urban-rural gap, the overall CVforZhejiangincreasedonlymarginally between 1982 and 2000 (from0.39 to 0.40), and in Jiangsu it actually de-clined (0.73 to 0.67). In both provinces, as elsewhere in China, rural industrialisationhas been so rapid that the most successfulcounties have been reclassified as cities.However, the principal effect of rural industrialisation has been to drive the increase in inequality between counties ob-served in Table 4. While some counties have forged ahead on theback of successful rural industrialisation, others have fallen be-hind because of industrial underdevelopment. Many of these un-successful counties during the 1982-2000 period were in westernChina: there is a clear correlation between location on the onehand, and both the level and the rate of growth of GDP per head on the other. Nevertheless, many relatively slow-growing coun-ties were located in eastern China. As a result, inequalities in GDPper capita between counties have risen even in the coastal prov-inces. For example, inter-rural inequality also increased over thecourse of the 1980s and 1990s in Jiangsu, a province with a well-established transport infrastructure and few real geographicalobstacles to development. Although the overall CV fell from 0.74to 0.66, the rural CV increased massively, rising from 0.28 in 1982to 0.69 in 2000. This reflects the joint impact of rapid rural industrialisation in the southern part of the province and slowindustrialisation in its northern counties.The trend in spatial inequality between counties for Zhejiangis especially revealing given both its well-developed infrastruc-ture and its twin growth poles in Hangzhou-Ningbo to the northand in the Wenzhou area in the south-east. In Zhejiang at least,one might therefore have expected powerful spread effects and hence convergence. However, the CV for county GDP per capitarose from 0.32 to 0.39 between 1982 and 2000. Ye and Wei (2005)arrive at the same conclusion; their data shows an even more dra-matic increase in the rural CV between 1978 and 1998.14In fact,there is a clear distinction between the core and the periphery inZhejiang. Per capita GDP levels are high around the urban centres of Hangzhou, Ningbo and Wenzhou but they are much lower inthe counties on the southern border of the province. Alarmingly,there is evidence of divergence even within a geographical unitas small as Wenzhou municipality itself. As noted earlier, its twopoorest counties (Wencheng and Taishun) enjoyed an annual real per capita GDP growth of 10 and 13% respectively between1978 and 2004, but this did not lead to convergence because me-dian GDP per capita growth in the municipality was almost 16%.Thus, despite their good growth record, Wencheng and Taishunfell further behind and they remain part of Zhejiang’s poor south-ern border region. The likely explanation is the exodus of skilled labour and capital from the two to faster-growing Wenzhou counties.This evidence of rising inter-rural ine-quality even in provinces like Jiangsu andZhejiang suggests that rural industrialisa-tion not only failed to generate large posi-tive spillovers but also may have producedbackwash effects. Most migrants beingyoung and skilled, their exodus may havedenuded poor regions of the human capi-tal needed for indigenous industrialisation.The very fact that neither Jiangxi nor Anhuiexperienced rapid per capita GDP growthin the 1980s and 1990s despite massiveoutmigration lends support to the conclu-sion that industrialisation, for all its poverty-reducing effects, ex-acerbated spatial inequality between counties.4 ConclusionsRural industrialisation has proved to be a double-edged sword for China. On the one hand, it has played a key role in reducingabsolute poverty by job creation. These new jobs have attracted local farmers, hence reducing poverty in the main centres of rural industrialisation such as Zhejiang, Jiangsu and Guangdong.Rural industries have also attracted farm workers from the deepinterior, and in the process helped to reduce poverty in histori-cally underdeveloped provinces like Anhui and Guizhou. In thissense at least, the fruits of rural industrialisation in regions fa-voured by history and by geography have trickled down to otherparts of the People’s Republic. Moreover, rural industrialisationhas been so rapid that the per capita GDP gap between cities and those areas which were rural in the early 1980s has narrowed.For example, much of Sunan has started to catch up with Shang-hai. This outcome fits better with traditional diminishing returns-based neoclassical theory than the predictions of much of thenew economic geography.However, and precisely because the process has been so uneven,rural industrialisation has exacerbated inequality across rural China. At a local level, the main beneficiaries of remittance in-come appear to have been non-poor households, such that the neteffect of remittances on the income distribution is disequalising.The impact on spatial inequality has also been adverse. Althoughsome counties have bounded ahead, many have been left behind;as a result, inequalities in per capita GDP between China’s counties have risen. Migration has brought some benefits to the peripheryvia remittances, but growth rates have still been much slowerTable4:coefficientofVariationforcounty-LevelPercapita GDP (1982and2000)All CitiesCounties Only Cities Only Urban-Rural andCountiesGap(Ratio)19820.740.400.563.0:120000.840.750.632.4:1Counties and (county-level) cities are as designated at thetime of the 1982 Population Census for both the 1982 and 2000calculations. This approach is adopted because we are primarilyinterested in the fate of areas which were rural in 1982. As manycounties have been reclassified as cities over the last two decades,it makes little sense to use the jurisdictional boundaries of 2000.That type of approach makes the notion of a successful countya contradiction in terms: any county which enjoys very rapidgrowth is reclassified as a city and therefore successful rural industrialisation is definitionally impossible. The population dataused here are the census figures on the resident population, whichinclude floaters of six months or more. Note that the coefficients ofvariation are not sensitive to population weighting.Sources: See Bramall (2007) for GDP sources and methodology.Population data from SSB (1988; 2000).
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china since 1978Economic & Political WeeklyEPWdecember 27, 200849than in the core because of the exodus of skilled labour. More-over, there is little to suggest that the process of outmigration hasslowed or halted in more recent years. To be sure, there havebeen reports of labour shortages in the coastal provinces, seem-ingly driven by a stagnation of real wages in rural industry (Shaoet al 2007). Further, the very fact that the size of the nationalfloating population in 2005 was only a little higher than it was in2000 (147 to 144 million) suggests that the process of outmigra-tion is slowing. Nevertheless, and although we must await theresults of the next national census to be sure, there is little signthat the flood of inter-provincial migrants into the most dynamiccoastal region is abating. Jiangsu’s permanent population (whichincludes floaters of six months duration or more) increased by0.6% a year between 2000 and 2007. However, the rate was much faster in the municipalities of Sunan. Nanjing’s populationincreased annually by 2.8%, Wuxi’s by 2.4% and Suzhou’s by3.8% (JSB 2008). Similarly for Hunan; the latest data suggest atotal of 6.9 million extra-provincial migrants, well up on the 4.3 million of 2000 (HSB 2008).This evidence that rural industrialisation (and the migrationflows it engenders) is both continuing, and disequalising in its effects on spatial inequality in the countryside, suggests that policyaction is needed to accelerate the pace of industrialisation inbackward regions. However, this remedy has found little favouramongst scholars. Instead, the conventional wisdom is that rural industrialisation is not the solution to backwardness, and that poorareas would do better to focus on agriculture or on the develop-ment of infrastructure (Rozelle and Nyberg 1999; Zhang et al 2003). There are two lines of argument at work here. One is outright geographical determinism: industrialisation is simplyinfeasible in western China. Second, industrial development isfrowned upon because it will have to be state-run and state-sub-sidised in the early stages of development for the usual infant in-dustry reasons (private sector banks are unwilling to supplyfunds to infant industries because of the uncertainty involved).Hostility towards state-led industrial policy feeds into hostilitytowards rural industrialisation, irrespective of the merits ofthat industrialisation.Yet neither of these arguments against industrialisation iscompelling. Of course geography imposes constraints upon de-velopment. There are remote areas across China like the Hima-layan plateau and the Gobi desert where industrialisation is notfeasible. However, for most of central and even western China,geography is only as a minor constraint. Moreover, many of theobstacles to inter-provincial trade result from local protectionismrather than high transport costs. And Henan’s experience sup-ports the conclusion that the disadvantages of being located inthe interior are all too easy to exaggerate. Although historically avery poor province and lacking the geographical advantages en-joyed by the coastal provinces, Henan has experienced rapid in-dustrialisation since the early 1980s. This suggests that, for manypoor areas, geography is not destiny: the return to investment inmanufacturing is higher than the return to investment in educa-tion, agriculture or infrastructure.As for the second argument, the Chinese evidence suggests apositive role for the state. Convergence between China’s cities and parts of the countryside may be occurring: that outcome is verymuch a neoclassical one. However, the underlying processes driv-ing convergence are anything but neoclassical. Rather, successfulrural industrialisation across China has been built by local govern-ments acting as developmental states. The very fact that rapidindustrialisation was both rapid and state-led in Jiangsu in parti-cular, and in rural China in general, during the 1980s and 1990s suggests that the local state is the solution to backwardness, notpart of the problem. It was not private industry that allowed manyparts of rural Sunan to begin to catch up with the well-established cities of the Yangzi delta but the agency of local government.15All this suggests a clear policy conclusion: China needs morerural industrialisation, rather than less, if poor counties are to catchup. To reduce spatial inequality, China should aim for a high level equilibrium (in which the majority of counties are industrialised)than a low level equilibrium (in which industry is underdevel-oped). Successful rural areas have closed the gap between them-selves and the cities by rapid industrialisation, and logic dictates that poor rural areas can achieve the same outcome if they per-sist with – or in some cases initiate – industrial development.Notes1 For a variety of perspectives on the causes of rural industrialisation, see Oi (1999), Whiting (2001),and Bramall (2007).2 The abolition of communes and brigades in 1984meant that the ownership of CBEs was transferred to the newly formed town, township and villagegovernments. Since then, the TVE epithet has been used to describe the sector. Note, however,that the coverage of the TVE sector is broaderthan that of the old CBE sector because it includes the private enterprises (in which category I in-clude household, or what the Chinese call geti en-terprises), which developed quickly in the early1980s. The Chinese data series are not consistentacross the 1984 divide; much of the growth of themid-1980s (total employment increased by over60% in 1984) simply reflects redefinition.3 Output and employment in the TVE sector havebeen over-reported. Much of it was identified dur-ing the course of the 1995 Industrial Census and the 1997 data were adjusted accordingly. The cov-erage of the sector was also partially redefined inline with a more general re-definition of Chineseindustrial sub-sectors; the effect was to reducetotal employment in the TVE sector by around 3million workers. Nevertheless, the “fact” of rapidrural industrialisation after 1978 is not in doubt.4 As there is some evidence that the size of the farmworkforce is exaggerated (a large portion of thenotional farm workforce had migrated to the cit-ies; see Rawski and Mead 1998), it may be thatrural industry employed close to a quarter of therural workforce.5 These figures categorise all enterprises designatedas collective, cooperative, joint or limited liabilityas “public”. Most had a large state-ownershipshare, but this approach does somewhat over-state the size of the public share.6 Sunan in this article refers to the counties ofsouthern Jiangsu and northern Zhejiang.7 For an excellent survey of migration issues, seeFan (2008). I use “migrant” here to refer to thefloating population (liudong renkou), meaning (as defined in the 2000 Census) anyone living awayfrom home for six months or more. The official definition of a migrant in China is a person whochanges his or her place of household registration(qianyi renkou) but the scale of these flows issmall; it is the floating population which is of in-terest to scholars and policymakers.8 Many migrants were employed in the tertiary sec-tor; the 2006 second agricultural census reveals that 57% of migrants were employed in industry,41% in the tertiary sector and only 2% in agricul-ture. However, the tertiary sector itself only de-veloped because of rural industrialisation.9 National surveys of rural income report the samefinding: wage income, of which remittance in-come was a key component, had a strongly dise-qualising effect on the distribution of rural in-come (Gustaffson et al 2008: 66-67).10 Almost all the literature considers only inequalitybetween provinces, which is not especially useful given both the level of aggregation (many Chineseprovinces are as big as large European countries)and the mix of urban and rural jurisdictions withineach province. An exception is Rozelle (1996), buthis study uses county-level data on gross output
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china since 1978december 27, 2008EPWEconomic & Political Weekly50value instead of value added. The prefecture has also been used as the unit of analysis but Chineseprefectures are political constructs and changetheir boundaries frequently; they too are a mix ofurban and rural jurisdictions.11 Time series data on rates of rural industrialisa-tion by county for the entire post-1978 period areunavailable and therefore we cannot measure ru-ral industrial growth directly.12 It is not possible to extend the analysis beyond 2000 because we lack good population data. A 1%survey was carried out in 2005 but it is unclear if the results are reliable; in any case, comprehen-sive county-level data from it are not available.Household registration data are published eachyear by each province but, because these do notinclude the floating population, they are of littleuse. Moreover, we cannot extrapolate the growthrate for 1982-2000 to the next decade. This is evi-dent from the case of Jiangsu province, for whichthe 2005 data are available. Although the popula-tion of northern Jiangsu rose annually by 1.2%between 1982 and 2000 (the high birth rate off-setting outmigration), it declined by 0.3% peryear between 2000 and 2005 (JSB 2006: 86; JSB 2002: 61; SSB 1988: 590-594). Evidently the pop-ulation dynamics of the new millennium did notreplicate those of the Dengist era.13 If we assume a relatively higher inflation rate inurban China over the period, then the true urban-rural gap may have declined even further.14 This is because they use hukou instead of census populations (thus omitting the equalising impacton the population denominator of migrant work-ers). It may also be because they have used a dif-ferent definition of rural, though the definitional approach is unclear in their paper.15 Since the privatisations of the late 1990s, whichaffected Jiangsu much more than any other prov-ince, the per capita income gap between it and neighbouring Zhejiang has widened, a tellingcommentary on the effectiveness of privatisation as a development strategy.ReferencesACMR (2006): 2000 China County Population CensusData with County Maps (Version III, CD-ROM),All China Marketing Research (Beijing: StateStatistical Bureau).Bramall, C (2007): The Industrialisation of RuralChina (Oxford: Oxford University Press).CPIRC (2008): “Zhongguo nongcun juedui pinkunrenkou yi jianzhi 1500 wan yixia”, China Popula-tion Information and Research Centre, (China’s Rural Absolute Poverty Count Has Already FallenBelow 15 million), at http://www.cpirc.org.cn/news (accessed 15 July).De Brauw, A and S Rozelle (2008): “Migration and Household Investment in Rural China”, ChinaEconomic Review, 19, 320-35.Deng, X P (1987): “We Shall Speed up Reform” inX P Deng (1994), Selected Works of Deng Xiaoping, Vol III (Beijing: Foreign Languages Press).Fan, C (2008): “Migration, Hukou and the City” inS Yusuf and T Saich (ed.), China Urbanises (Wash-ington DC: World Bank).GSB (2003): Guangdong tongji nianjian 2003 (Guang-dong Statistical Yearbook), (Beijing: State Statis-tical Bureau).Gustaffson, B A, S Li and T Sicular, ed. (2008): Ine-quality and Public Policy in China (Cambridge:Cambridge University Press).Hare, D and S K Zhao (2000): “Labour Migration as aRural Development Strategy” in L A West andY H Zhao (ed.), Rural Labour Flows in China(Berkeley: Institute of East Asian Studies).HSB (2008): “Hunan nongcun huji waichu congye lao-dongli chaoguo yiqian wan ren”, Hunan Statistical Bureau (The Total Number of Hunan Rural Migrants Exceeds 10 Million). At http://www.stats.gov.cn/was40/gjtjj_ detail.jsp?channelid=57792&record=96(accessed 11August 2008).Sonobe, T, D Y Hu and K Otsuka (2004): “From Inferiorto Superior Products: An Inquiry into the WenzhouModel of Industrial Development in China”, Journalof Comparative Economics, 32 (3), 542-63.SSB (1988): Zhongguo renkou tongji nianjian 1988(Chinese Population Statistics Yearbook), (Beijing:State Statistical Bureau).– (2000): County Tabulations from the 2000 Census, at http://www.stats.gov.cn/tjsj/ndsj/renkoupucha/2000fenxian/htm/table3 (accessed 3 August 2008).– (2001): Zhongguo tongji nianjian 2001 (ChineseStatistical Yearbook), (Beijing: State StatisticalBureau).– (2002): Zhongguo tongji nianjian 2002 (ChineseStatistical Yearbook), (Beijing: State StatisticalBureau).– (2003): Zhongguo nongcun pinkun jiance baogao2003 (Poverty Monitoring Report for Rural China),(Beijing: State Statistical Bureau).– (2005): Zhongguo laodong tongji nianjian 2005(Chinese Labour Statistical Yearbook), (Beijing:State Statistical Bureau).– (2006): Zhongguo renkou tongji nianjian 2006(Chinese Population Statistics Yearbook), (Beijing:State Statistical Bureau).– (2007a): Zhongguo nongcun zhumin diaocha nian-jian 2007 (Chinese Rural Household Survey2007), (Beijing: State Statistical Bureau).– (2007b): Zhongguo laodong tongji nianjian 2007(Chinese Labour Statistical Yearbook), (Beijing:State Statistical Bureau).– (2008): “Communiqué on Major Data of the Second National Agricultural Census of China (No 5)”,At http://www.stats.gov.cn/english/newsandcomin-gevents/t20080303_402465584.htm (accessed 8 July 2008).Wang, W F W and C C Fan (2006): “Success or Failure:Selectivity and Reasons for Return Migration inSichuan and Anhui, China”, Environment andPlanning A, 35 (5), 939-58.Wenzhou tongjiju (Wenzhou Statistical Bureau)(2005): Wenzhou tongji nianjian 2005 (WenzhouStatistical Yearbook), (Beijing: State Statistical Bureau).Whiting, S H (2001): Power and Wealth in Rural China (Cambridge: Cambridge University Press).Ye, X Y and Y H D Wei (2005): “Geospatial Analysis of Regional Development in China: The Case of Zhejiang Province and the Wenzhou Model”,Eurasian Geography and Economics, 46 (5), 342-61.Zhang, L X, J K Huang and S Rozelle (2003): “China’s War on Poverty”, Journal of Chinese Economic andBusiness Studies, 1 (3), 301-17.JSB (2002): Jiangsu tongji nianjian 2002 (Jiangsu Sta-tistical Yearbook), (Jiangsu Statistical Bureau),(Beijing: State Statistical Bureau).– (2006): Jiangsu tongji nianjian 2006 (JiangsuStatistical Yearbook), (Beijing: State StatisticalBureau).– (2008): “Sunan wushi renkou zengzhang yu jingjixietiao fazhan guanxi yanjiu” (Research on theCoordination of Economic Development and Pop-ulation Growth in Five Cities in Sunan), at http://www.stats.gov.cn/ was40/gjtjj_detail.jsp?channelid=57792&record =100 (accessed 15 August 2008).Nolan, P and F R Dong, ed. (1990): Market Forces inChina (London: Zed).Nongye bu (Ministry of Agriculture) (1981): “1977 zhi1979 quanguo qiongxian qingkuang” (Poor Coun-ties in China, 1977-1979), Xinhua Yuebao (New China Monthly), 2, 117-20.– (1995): Zhongguo nongye tongji ziliao 1994(Statistical Materials on Chinese Agriculture),(Beijing: Chinese Agricultural Publishing House).– (2006): Zhongguo nongye nianjian 2006 (ChineseAgricultural Yearbook), (Beijing: Chinese Agri-cultural Publishing House).Nyberg, A and S Rozelle (1999): Accelerating China’sRural Transformation (Washington DC: World Bank).Nygard, J and X M Guo (2001): “Environmental Man-agement of Chinese Township and Village Indus-trial Enterprises”, Background paper for World Bank, China: Air, Land and Water (WashingtonDC: World Bank).Oi, J C (1999): Rural China Takes Off (Berkeley:California University Press).OLG (1989): Outline of Economic Development in China’sPoor Areas, (Office of the Leading Group forPoverty Reduction) (Beijing: State Council).– (2004): “List of Key Counties for National PovertyReduction and Development”, at http://en.cpad.gov.cn/item/2004-05-24/50003.html (accessed 24 May 2005).Rawski, T G and R W Mead (1998): “On the Trail of China’s Phantom Farmers”, World Development,26 (5), 767-81.Riskin, C (1993): “Poverty in China’s Countryside”in P Bardhan (ed.), Development and Change(Bombay: Oxford University Press).Rozelle, S (1996): “Stagnation without Equity”, China Journal, 35, 63-92.SEPA (2006): Zhongguo huanjing tongji nianjian(China Environmental Statistical Yearbook),(Beijing: State Statistical Bureau).Shao, S J, I Nielsen, C Nyland, R Smyth, M Q Zhangand C J H Zhu (2007): “Migrants as Homo Eco-nomicus”, China Information, 21 (7), 7-41.ReView OF LabOuRMay 31, 2008Class in Industrial Disputes: Case Studies from Bangalore – Supriya RoyChowdhuryEmployee Voice and Collective Formation in Indian ITES-BPO Industry– Philip Taylore, Ernesto Noronha,Dora Scholarios, Premilla D’CruzThe Growth Miracle, Institutional Reforms and Employment in China– Ajit K GhoseSoccer Ball Production for Nike in Pakistan– Karin Astrid SiegmannLabour Regulation and Employment Protection in Europe:Some Reflections for Developing Countries– A V JoseLabour, Class and Economy: Rethinking Trade Union Struggle– Anjan Chakrabarti, Anup Kumar DharFor copies write to Circulation ManagerEconomic and Political Weekly320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013.email: circulation@epw.in

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